NYS cut pensions for new workers, but some say it went too far

ALBANY — State lawmakers are looking to roll back pension reforms that cut benefits for public workers hired after 2011 — adjustments that could help attract and retain workers but also increase costs for local governments and schools.

Fast-rising pension costs led legislators to create a new, sixth pension tier 14 years ago known as Tier 6, and public workers hired on or after April 1, 2012, as a result receive fewer benefits, wait longer to retire and contribute more money. 

But now a push is on to turn back some of those changes in an effort to make public sector jobs more attractive, as union leaders say employers struggle to find workers, particularly correction officers, nurses and some teaching positions. 

“It really is a matter of fairness. The Tier 6 people are looking at their future career and wondering if it’s worth it,” said Melinda Person, president of New York State United Teachers, the state’s largest teachers union representing nearly 700,000 members. “Public service is important and pensions should reflect that.”

Union leaders said offering more benefits would draw in new workers and help retain public employees including government workers, teachers, firefighters, police and health care workers at public hospitals such as Stony Brook University Hospital and Nassau University Medical Center.  

Statewide, there are approximately 708,000 members of Tier 6, according to the most recent data from the state comptroller's office, state Teachers' Retirement System and the New York City Office of the Actuary. Changes would not generally affect members of the NYPD or FDNY pension funds because new members are generally considered Tier 3, according to the Office of the Actuary. 

“Fixing Tier 6 is a top priority,” said Mario Cilento, president of the New York State AFL-CIO trade union, which consists of 3,000 local unions from across the state and has 2.5 million members.
 

Gov. Kathy Hochul told Newsday conversations about increasing benefits are ongoing. “We have to do it in a smart way,” she said, acknowledging the cost.

Possible changes

What the changes will be is still under discussion but could include reducing employee contribution rates, cutting the number of years workers have to pay into the pension system, or lowering the retirement age, according to union leaders and lawmakers.

Adjustments were not included in Hochul’s $260 billion proposed state budget this year, but could be added as the governor negotiates with Democratic leaders of the State Senate and Assembly who hold a majority in both chambers. The state budget is due by April 1.

Hochul, members of Congress and all 213 seats in the State Legislature are up for election. Unions historically have been considered valuable allies when it comes to campaign funding and putting boots on the ground.

"It can't hurt Democrats at all," said Hank Sheinkopf, a 40-year veteran political strategist. 

Fiscal government watchdog groups, however, take issue with a move to add benefits back in, saying adjustments would increase employer contribution rates for state and local governments, some health facilities and school districts, and the costs could continue to rise annually.

“If the Legislature guts the Tier 6 reforms, the immediate result will be exploding pension costs,” said Ken Girardin, a fellow at the Manhattan Institute, a fiscally conservative think tank. “Most of that cost would hit people in their local taxes. It would be cataclysmic for school districts especially.”

Girardin estimated that “fixing” Tier 6 would cost taxpayers easily over $100 billion. “From a financial perspective, this is the single most destructive thing that could hit the governor’s desk," he said.

Making jobs attractive

Historically, there has been a trade-off, with public workers taking maybe a little less in pay than they would in the private sector, for better retirement years, Cilento told Newsday. “Unfortunately, Tier 6 kind of peeled that back.”

Without enough new workers, employees in high-need fields such as nursing end up doing significant amounts of overtime, Cilento said, adding that some burn out and leave as a result. And lack of workers impacts the quality of service, union leaders and lawmakers said.

The 2024-25 state budget, approved in 2024, included some adjustments to Tier 6 to essentially increase the level of benefits public workers receive when they retire and keep employee contribution rates low for those who earn overtime pay. The salary calculation shift was estimated to cost $377 million in the first year, according to the final budget legislation.

“This year there's a much more concentrated effort for tier equity,” said State Sen. Jessica Ramos (D-Jackson Heights), who chairs the labor committee.

The clarion call for this budget cycle is to set employee contributions — which are currently set at different levels based on annual wages — at 3% across the board, the same as Tier 5, Ramos said.

The state also could limit the number of years employees must pay into the pension system, Sen. Alexis Weik (R-Sayville) told Newsday. Tier 6 workers have to pay a percentage of their earnings for all of their years of service, and they pay more as their salary rises.

“It’s not going to bankrupt the state,” Weik said, adding that there are fewer jobs since 2012 due to improving technology.